Green Permits
- Date Submitted: 01/28/2010 06:29 AM
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Transferable discharge permits create an economic incentive to reduce pollution and
exhibit many other advantages over the current command and control pollution regulation
system. However, ‘green permits’ on a large scale would be difficult to allocate fairly, and
the efficient economic outcome may not be the socially desirable outcome.
Introduction to Green Permits
1. Green Permits as an incentive to reduce pollution:
cost to pollute- tie up money
induces costs/benefits of pollution to owner of permits
a. polluter pays
incentives for research and development
2. Green Permit benefits over Command and Control
under CAC delay is profitable
new technology must develop to ever-changing EPA standards
fixed cost of pollution -free if under guidelines no incentive to reduce
each pollution written into law
b. who determines value of each pollutant
c. special interest groups ruling majority
1. Problems with Green Permits
initial allocation
c. auction off - generate revenue but create barriers
d. give away - harm firms already environmentally friendly
trading rules leading to socially undesirable outcome
a. anybody trade - geographic concentration problem
b. mixing problem - receptor sites and ambient standards
4. Green Permits as a market failure
can’t have failed without trying on large scale
example - rapid phaseout of lead gasoline
References:
Develin, Rose, Grafton, Quentin. Marketable emission permits:efficiency, profitability and
substitutability. Canadian Journal of Economics, Ap(96). Vol.29,260-264
Rothschild, Micheal. (1992) Green Markets. Upside. Bionomics Institute
Field, Barry, Olewiler, Nancy. Environmental...
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